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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






2. Es = (%dQs) / (%dPrice)






3. A good for which higher income increases demand






4. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






5. The price of a good measured in units of currency






6. Ed = 1






7. All firms maximize profit by producing where MR = MC






8. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






9. The most desirable alternative given up as the result of a decision






10. Ed > 1 - meaning consumers are price sensitive






11. TR = P * Qd






12. The sum of consumer surplus and producer surplus






13. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






14. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






15. The additional cost incurred from the consumption of the next unit of a good or a service






16. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






17. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






18. Entry (or exit) of firms does not shift the cost curves of firms in the industry






19. Entry of new firms shifts the cost curves for all firms upward






20. The practice of selling essentially the same good to different groups of consumers at different prices






21. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






22. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






23. The mechanism for combining production resources - with existing technology - into finished goods and services






24. Exists if a producer can produce a good at lower opportunity cost than all other producers






25. The ability to set the price above the perfectly competitive level






26. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






27. The marginal utility from consumption of more and more of that item falls over time






28. The total quantity - or total output of a good produced at each quantity of labor employed






29. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






30. The imbalance between limited productive resources and unlimited human wants






31. Ei > 1






32. MUx / Px = MUy/Py or MUx/MUy = Px/Py






33. The output where ATC is minimized and economic profit is zero






34. A good for which higher income decreases demand






35. When firms focus their resources on production of goods for which they have comparative advantage






36. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






37. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






38. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






39. 0 < Ei < 1






40. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






41. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






42. Entry of new firms shifts the cost curves for all firms downward






43. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






44. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






45. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






46. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






47. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






48. ATC = TC/Q = AFC + AVC






49. Ed = 8 - infinite change in demand to price change






50. The lost net benefit to society caused by a movement away from the competitive market equilibrium







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